Profit Multiplier Review

Intended capital management is to identify the funds invested by the size of shops as well as the size of the risk, an amount expected loss per transaction of funds in case of non-functioning of the deal according to the method of analysis and vision shops.

If the administration of Profit Multiplier capital to ensure stores to stay in the market and the reduction of losses, Profit Multiplier that one of the traffickers has to enter into a deal with a large number of contracts was not the deal is going according to his desire, the result is the loss of a large part of its capital, which may be paid to the recklessness and engage the largest number of contracts to compensate for the loss that ends up being a loss for the entire account.

On the other hand if we assume that the investor has a plan for the management of capital in the implementation of reliable dealings and that the size of the risk 2%, with the loss of stay on the market even with repeated losses.

Profit Multiplier Capital elements:

The use of stop-loss order:

One of the effective tools that play an important cycle in capital management, ordered a stop loss spare the shops in the violent market moves that may lead to the loss account.

Determine the stop loss order is placed carefully and according to the size of risk that can be borne by the stores. If the market moves in the opposite direction of your position, you will not lose more than you specified using a stop loss order.

Determine the percentage of at-risk capital per transaction Risk%:

A proportion of funds exposed to loss in the event of the loss of a single package which can be borne by the shops.

That Profit Multiplier percentage varies from store to another, but preferably the ratio of 1% to stores for short-term stores 3% medium-term and not more than 5% to long term trade.

For example: If the account size of $ 10,000 has you select a risk ratio of 2% if the funds vulnerable to loss size is calculated as follows:
The size of the funds vulnerable to loss = ((specified percentage ÷ 100) × account size)
Money-prone loss size = ((2 ÷ 100) × 10000 dollars) = $ 200.
Identify trading contracts based on the size of funds exposed to risky Lot Size:

Based on the amount of money exposed to risk is determined the size of the contracts, but you first have to determine what is the number of stop-loss points, and from it you can determine the size of trading contracts as follows:
Number of Profit Multiplier contracts = the amount of money exposed to risk ÷ (the number of stop-loss points × point value)
= The number of contracts of $ 200 ÷ (50 points × $ 10 value point) = 0.4 standard contract = 4 mini contracts.

Into account the rate of return to risk (Reward Risk):

It is the ratio between profit and loss per transaction, assuming that you have to enter a deal to hold the measure and stop loss order 20 points ($ 200) and the goal of the deal 40 points ($ 400), the rate of return to risk shall be as follows:
400 ÷ 200 = 2.
If the expected profit from the deal is the weakness of the loss of 2: 1.

For example, if a Wealth Distribution Society capital $10,000 and the percentage of its profits in 10 consecutive trades 40% By specifying if the rate of return to risk the situation is as follows:
The ratio 1: 1 = (US $ 200 × 4 successful deals) – (US $ 200 × 6 losing trades) = $ 400 loss.
The ratio 2: 1 = (US $ 400 × 4 successful deals) – (US $ 200 × 6 losing trades) = $ 400 profit.
The ratio 3: 1 = (US $ 600 × 4 successful deals) – (US $ 200 × 6 losing trades) profit = $ 1,200.
Despite the large proportion of the total losses of the recipes, but the rate of return to compensate for this loss risk with higher profit rate to yield increases the amount of profits. Best ratio between the yield and the loss is 3: 1 and must not be less than 2: 1.

Practical plan to manage capital status:

After learning about money on top of the different elements that should be a model for the application of capital management mode.

First:

Should specify the nature of the shops trading Is it short-term or medium-term or long-term? Consequently determine seasonal periods to assess the results:
Shops long-term: the period of seasonal years to assess the results.
Storage Medium term: seasonal period to assess the results month.
Short-term Storage: seasonal period to assess the results a week.

Second:

Put ratio to risk during the period of maximum loss:
Shops long-term 50% during the year.
Storage term average of 20% during the month.
Shops a short-term 10% during the day.

Third:

Determine the percentage of risk per deal so that 10% of the rate-prone during the season:
Shops long-term 5%.
Storage term average of 2%.
Stores short-term 1%.

Fourth:

Determine the rate of return to risk so that not less than 1: 2.

Hence the commitment should shops Ae and the laws of his plan in capital management, whatever the temptations of the market, even if it led him to the seasonal evaluates successive loss that will determine the efficiency of his plan for the management of capital.